Browse > Article
http://dx.doi.org/10.13106/jafeb.2022.vol9.no6.0245

The Impact of Fiscal Policy Instruments on Economic Wellness: Evidence From Malaysian Per Capita Income  

OTHMAN, Nor Salwati (Department of Accounting & Finance, College of Business Management and Accounting, Universiti Tenaga Nasional)
TAI, Teh Lian (Strategic Planning & International Division, Ministry of Plantation Industries and Commodities)
Publication Information
The Journal of Asian Finance, Economics and Business / v.9, no.6, 2022 , pp. 245-252 More about this Journal
Abstract
This study examines the strength of the impact of fiscal policy tools on economic wellbeing as measured by per capita income in Malaysia from 1996 to 2020. The impact of fiscal policy instruments on economic wellness, represented by real income per capita, is measured using the autoregressive distributed lags model. The speed of adjustment from short-run disequilibrium to long-run equilibrium is also measured to assess the strength of the fiscal instruments' impact on per capita income. Empirical results exhibit the existence of co-integration relationships between per capita income, tax revenue, and government spending. The findings provide strong support for the presence of a long-run positive impact on government spending and a long-run negative impact of tax revenue on per capita income. The coefficient of ECTt-1 indicates that deviations from a short-run disequilibrium to a long-run equilibrium from the current to the future period are corrected with a speed of 76% (equivalent to a duration of 1.5-2 years to return to equilibrium). The practical and policy implication of the results is fiscal instruments play a significant role, mainly in alleviating the economic impact of the COVID-19 pandemic in the long run.
Keywords
Income Per Capita; Government Spending; Tax Revenue; Co-Integration; Malaysia;
Citations & Related Records
Times Cited By KSCI : 3  (Citation Analysis)
연도 인용수 순위
1 Pesaran, M. H., Shin, Y., & Smith, R. P. (1999). Pooled mean group estimation of dynamic heterogeneous panels. Journal of the American Statistical Association, 94(446), 621-634. https://doi.org/10.1080/01621459.1999.10474156   DOI
2 Abbasi, K. R., Shahbaz, M., Jiao, Z., & Tufail, M. (2021). How do energy consumption, industrial growth, urbanization, and CO2 emissions affect economic growth in Pakistan? A novel dynamic ARDL simulations approach. Energy, 221, 119793. https://doi.org/10.1016/j.energy.2021.119793   DOI
3 Adedokun, A. (2018). The effects of oil shocks on government expenditures and government revenues nexus in Nigeria (with exogeneity restrictions). Future Business Journal, 4(2), 219-232. https://doi.org/10.1016/j.fbj.2018.06.003   DOI
4 Xu, F., Huang, Q., Yue, H., He, C., Wang, C., & Zhang, H. (2020). Reexamining the relationship between urbanization and pollutant emissions in china based on the STIRPAT model. Journal of Environmental Management, 273, 111134. https://doi.org/10.1016/j.jenvman.2020.111134   DOI
5 Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association, 74(366), 427-431. https://doi.org/10.2307/2286348   DOI
6 Al-Bajjali, S. K., & Shamayleh, A. Y. (2018). Estimating the determinants of electricity consumption in Jordan. Energy, 147, 1311-1320. https://doi.org/10.1016/j.energy.2018.01.010   DOI
7 Basuki, A. T., Purwaningsih, Y., Soesilo, A. M., & Mulyanto, M. (2020). Determinants of economic growth in Indonesia: A dynamic panel model. Journal of Asian Finance, Economics, and Business, 7(11), 147-156. https://doi.org/10.13106/jafeb.2020.vol7.no11.147   DOI
8 Bekhet, H. A., & Othman, N. S. (2012). Examining the role of fiscal policy in the Malaysian stock market. International Business Research, 5(12), 59-67. http://doi.org/10.5539/ibr.v5n12p59   DOI
9 Ismail, N. A., & Houssein, A. E. M. E. (2020). The impact of fiscal policy on GDP per capita: Evidence from Malaysia. International Journal of Politics, Public Policy, and Social Works, 2(5), 14-25. https://doi.org/10.35631/IJPPSW.25002   DOI
10 Othman, N. S., & Bekhet, H. A. (2021). Dynamic effects of Malaysia's government spending on environment quality: Bridging STIRPAT and EKC hypothesis. International Journal of Energy Economics and Policy, 11(5), 343-355. https://doi.org/10.32479/ijeep.11273   DOI
11 Tsaurai, K., & Odhiambo, N. M. (2013). Government expenditure and economic growth in Zimbabwe: An ARDL-bounds testing approach. International Journal of Economic Policy in Emerging Economies, 6(1), 78-90. https://doi.org/10.1504/IJEPEE.2013.054474   DOI
12 Law, S. H. (2008). Does a country's openness to trade and capital accounts lead to financial development: Evidence from Malaysia. Asian Economic Journal, 22(2), 161-177. https://doi.org/10.1111/j.1467-8381.2008.00273.x   DOI
13 Alzyadat, A. J., Al-Nsour, A. I. (2021). The fiscal policy instruments and the economic prosperity in Jordan. Journal of Asian Finance, Economics, and Business, 8(1), 113-122. https://doi.org/10.13106/jafeb.2021.vol8.no1.113   DOI
14 Narayan, P. K. (2005). The government revenue and government expenditure nexus: Empirical evidence from nine Asian countries. Journal of Asian Economics, 15(6), 1203-1216. https://doi.org/10.1016/j.asieco.2004.11.007   DOI
15 Zhang, L., Godil, D. I., Bibi, M., Khan, M. K., Sarwat, S., & Anser, M. K. (2021). Caring for the environment: How do human capital, natural resources, and economic growth interact with environmental degradation in Pakistan? A dynamic ARDL approach. Science of the Total Environment, 774, 145553. https://doi.org/10.1016/j.scitotenv.2021.145553   DOI
16 Magazzino, C. (2012). Wagner versus Keynes: Public spending and national income in Italy. Journal of Policy Modeling, 34(6), 890-905. https://doi.org/10.1016/j.jpolmod.2012.05.012   DOI
17 Mehrara, M. (2014). Government expenditure and economic growth: An ARDL approach for the case of Iran. International Journal of Research in Social Sciences, 4(1), 72.
18 Pesaran, M. H., & Shin, Y. (1995). An autoregressive distributed lag modeling approach to cointegration analysis. NJ: Sage.
19 Hamdi, H., & Sbia, R. (2013). Dynamic relationships between oil revenues, government spending, and economic growth in an oil-dependent economy. Economic Modelling, 35, 118-125. https://doi.org/10.1016/j.econmod.2013.06.043   DOI
20 Adebumiti, Q., & Mansur, M. (2018). Economic growth, energy consumption, and government expenditure: evidence from a nonlinear ARDL analysis (MPRA Paper no. 87527). Munich, Germany: MPRA. https://mpra.ub.uni-muenchen.de/87527/
21 Chishti, M. Z., Ahmad, M., Rehman, A., & Khan, M. K. (2021). Mitigations pathways towards sustainable development: Assessing the influence of fiscal and monetary policies on carbon emissions in BRICS economies. Journal of Cleaner Production, 292, 126035. https://doi.org/10.1016/j.jclepro.2021.126035   DOI
22 Karagoz, K., & Keskin, R. (2016). Impact of fiscal policy on the macroeconomic aggregates in turkey: Evidence from BVAR model. Procedia Economics and Finance, 38, 408-420. https://doi.org/10.1016/S2212-5671(16)30212-X   DOI
23 Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of long-run relationships. Journal of Applied Econometrics, 16(3), 289-326. https://doi.org/10.1002/jae.616   DOI
24 Singhania, M., & Saini, N. (2020). Revisiting environmental degradation and economic growth nexus using the autoregressive distributed lag approach. International Journal of Productivity and Performance Management, 69(8), 1765-1796. https://doi.org/10.1108/IJPPM-10-2019-0509   DOI
25 Stoian, A., & Iorgulescu, F. (2020). Fiscal policy and stock market efficiency: An ARDL bounds testing approach. Economic Modelling, 90, 406-416. https://doi.org/10.1016/j.econmod.2019.12.023   DOI
26 Arvin, M. B., Pradhan, R. P., & Nair, M. S. (2021). Are there links between institutional quality, government expenditure, tax revenue, and economic growth? Evidence from low-income and lower-middle-income countries. Economic Analysis and Policy, 70, 468-489. https://doi.org/10.1016/j.eap.2021.03.011   DOI
27 Mazorodze, B. T. (2018). Government expenditure and economic growth in Zimbabwe. African Journal of Business and Economic Research, 13(2), 183-202. https://doi.org/10.31920/1750-4562/2018/v13n2a9   DOI
28 Lahirushan, K. P. K., & Gunasekara, W. G. V. (2015). The impact of government expenditure on economic growth: A study of Asian countries. World Academy of Science Engineering and Technology International Journal of Humanities and Social Sciences, 9(9), 3152-3160.
29 Othman, N. S., Bekhet, H. A., & Lojuntin, S. A. (2020). Does Government expenditure contribute to Malaysia's environmental sustainability? A dynamic analysis. Global Business and Management Research: An International Journal, 12(4), 61-72.
30 Sivitanides, P. S. (2018). Macroeconomic drivers of London house prices. Journal of Property Investment and Finance, 36(6), 539-551. https://doi.org/10.1108/JPIF-02-2018-0012   DOI
31 The Edge Market. (2020). Government, 2020 expenditure allocation revised to RM314.7b from RM297b. https://www.http://theedgemarkets.com/article/govt-2020-expenditureallocationrevised-rm3147b-rm297b
32 Hsing, Y. (2019). Is expansionary fiscal and monetary policy effective in Australia? Journal of Business Economics and Environmental Studies, 9(3), 5-9. https://doi.org/10.13106/jbees.2019.vol9.no3.5   DOI
33 Zulkofli, A. Z., Nasiruddin, K., & Ismail, F. R. (2018). Government expenditure on education and healthcare to the effect on GDP value: A case of Malaysia. International Journal of Accounting and Business Management, 6(1), 95-112. https://doi.org/10.24924/ijabm/2018.04/v6.iss1/95.112   DOI
34 Kawohl, W., & Nordt, C. (2020). COVID-19, unemployment, and suicide. Lancet Psychiatry, 7(5), 389-390. https://doi.org/10.1016/S2215-0366(20)30141-3   DOI